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1. Leveraging Lives: Serbia and Illegal Tunisian Migration to Europe

Author:
Hamza Meddeb
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
In 2020–2022, Tunisian illegal migrants traveled through Serbia to reach Western Europe, as an alternative to the hazardous, more monitored Mediterranean route. This was driven by push factors in Tunisia, including deteriorating economic conditions and government acquiescence, and pull factors in Europe, namely smuggling networks and Serbian authorities looking the other way. While the route was sealed for Tunisians in November 2022, as long as transit states can use illegal migration to secure geopolitical leverage, such actions will continue.
Topic:
Migration, European Union, Economy, and Smuggling
Political Geography:
Europe, Serbia, North Africa, and Tunisia

2. Retain, Restructure, or Divest? Policy Options for Egypt’s Military Economy

Author:
Yezid Sayigh
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The Egyptian military has been on a dramatic expansionary trajectory since seizing power in July 2013. Having previously been an economic backwater, the Egyptian Armed Forces (EAF) and other military agencies have spearheaded the enormous state-led investment strategy that President Abdel Fattah el-Sisi has pursued since he came to office in 2014. The military controls a vast economic portfolio. It manages a significant share of the overall volume of publicly contracted infrastructure and housing. It builds industrial zones and produces capital goods, consumer durables, transport and heavy goods vehicles and parts, and information technology equipment. It undertakes associated retail, owns commercial media companies and hotels, and is rapidly increasing its stake in agriculture, fisheries, and mineral extraction. As of September 2021, the military even has a monopoly on the production of school meals. The Ministry of Defense (MOD) has formally controlled the use of state land by any civilian individual or entity, whether private or public, since 2001. The Ministry of Military Production (MOMP) is now one of two bodies that approves the import of foreign goods or services by government agencies. Military representatives sit on national boards, including for planning and sustainable development; feed into policy direction in several sectors, including the manufacturing industry, telecommunications, digital transformation, market development for electric vehicles, and rural development; and head major presidential initiatives, including the Long Live Egypt (Tahya Misr) development fund and the company responsible for constructing Egypt’s new administrative capital. Plans are underway to increase the capitalization of military companies by inviting private investment through the Egyptian sovereign wealth fund. What I have called an “officers’ republic”—comprising thousands of senior EAF retirees embedded in government ministries and agencies, regulatory and operational economic authorities, local government, and state-owned enterprises—complements the formal military economy. Military agencies and companies provide significant economic benefits. Military-managed public investment in transport infrastructure, for example, facilitates the movement of people and goods and expands access to external markets and investment opportunities. The construction of social housing for low-income groups addresses a serious shortage and assists government efforts to regenerate the informal settlements and slums where approximately one in seven Egyptians live. New industrial zones and extensive agricultural greenhouse projects attract investors, both domestic and foreign, contributing to economic growth and employment. And lower middle–class customers benefit from the expanding range of locally made consumer goods at affordable prices, alongside cheap meat and poultry imports, subsidized health services, and free food baskets for the poor. Why, then, should Egypt reconsider the military’s role in the economy?
Topic:
Armed Forces, Economy, Business, and Military
Political Geography:
Middle East, North Africa, and Egypt

3. Throwing Down the Gauntlet: What the IMF Can Do About Egypt’s Military Companies

Author:
Yezid Sayigh
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Until recently, both the International Monetary Fund (IMF) and the World Bank were wholly reticent to say anything about the involvement of the Egyptian Armed Forces (EAF) and other military agencies in Egypt’s civilian economy. This is a longstanding problem. By turning a blind eye to the diversion of resources to the military sector and to the increasingly significant impacts on the economy and public finances, these international financial institutions (IFIs) have undermined the effectiveness of their own programs and allowed their resources to be invested in support of suboptimal policies by the Egyptian government. There is a question of propriety when international assistance allows distorted policy incentives to continue or even intensify and disregards the fact that much of the hype about global growth in the Egyptian economy obscures the very real constraints imposed on private sector development. It is high time to throw down the gauntlet: IFIs and their governmental sponsors should tackle the reality of military involvement systematically in their programs and policy recommendations, and they should confront the issue head on in their dealings with Egypt’s authorities. Reticence persists but is starting to dissipate. A report released by the World Bank in December 2020 noted that military agencies account for an appreciable proportion of all state-owned enterprises producing capital goods; consumer durables and apparel; materials; food, beverages, and tobacco; automobiles and components; retailing; media and entertainment; semiconductors and intelligent transportation system equipment; and technology hardware and equipment.1 The IMF went further in a July 2021 review of its loan agreement with Egypt, in which it referred to the presence and role of Egyptian military companies for the first time ever.2 Significantly, it included them explicitly in its assessment of state-owned enterprises in general—many of which, the report noted, are “registering weak financial performance while some are benefiting from an uneven playing field”—and implied that military companies should come under the same broad reform policies that the IMF proposes for the public sector as a whole. Now that the IMF, in particular, has broken its former silence, it should refine its approach so as to tackle the Egyptian military’s economic role in a more targeted and consistent manner—hence making its approach more effective and sustainable. This requires a mix of measures. The first set involves bringing military agencies and companies within the scope of recommendations proposed by the IMF for Egypt’s civilian public sector and state-owned enterprises as a whole. These first measures therefore engage with IMF recommendations and Egyptian government policy initiatives relating to broad questions of ownership, regulation, and financing strategy. The second set of measures tackles the specific aspects of the legal, regulatory, and judicial frameworks that enable the military’s activities in the civilian domain. Unless they are revised, these enabling frameworks will impede wider reforms, but the Egyptian government and IMF have, for the most part, neither reviewed nor addressed them to date.
Topic:
Regulation, Economy, Business, IMF, Civil-Military Relations, and Military
Political Geography:
Middle East, North America, and Egypt

4. U.S. Strategy and Economic Statecraft: Understanding the Tradeoffs

Author:
Christopher S. Chivvis and Ethan Kapstein
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Few would dispute that U.S. economic policy has enormous consequences for America’s national security and role in the world. But economic policy is too often made without a clear picture of the strategic tradeoffs it entails. The purpose of this paper is to help clarify some of these tradeoffs by considering three alternative models of U.S. economic statecraft. The first model examined here, America First, has several national security and economic disadvantages. It would not only antagonize some of Washington’s key military allies but probably also undermine U.S. international competitiveness. It might even induce countries to turn their economic attention toward China, reducing the United States’ global influence accordingly. A better approach would be a blend of two other models, namely alliance economics and globalization 2.0. Together these approaches could help orient the United States for the geopolitical challenges of the next decade. By emphasizing commercial relations with U.S. military allies, such a blend would recall Article 2 of the North Atlantic Treaty, which calls for international economic cooperation among NATO member states. And by leading a reformed multilateral system, the United States would again put itself at the center of the rules-based global economic order that brought prosperity to millions.
Topic:
Foreign Policy, NATO, Geopolitics, Economy, Economic Cooperation, and Strategy
Political Geography:
North America and United States of America

5. Reckless Abandon: Why Tunisia Can No Longer Delay a Border Free Trade Zone

Author:
Hamza Meddeb
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
In 2012, Tunisia announced the establishment of a free trade and logistics zone (FTZ) in Ben Guerdane, near the Libyan border. The aim is to develop marginalized southeastern border regions and formalize informal economic actors. However, the plan has stalled due to institutional resistance, political divisions, and an incapacity to exploit international geopolitical rivalries. If this persists, the project may become irrelevant because of emerging FTZs in Libya, denying Tunisia revenues its ailing economy needs.
Topic:
Geopolitics, Economy, Borders, and Free Trade
Political Geography:
Libya, North Africa, and Tunisia

6. The Pitfalls of Saudi Arabia’s Security-Centric Strategy in Yemen

Author:
Ahmed Nagi
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Saudi Arabia’s security-oriented approach to Yemen has foundered. The Saudi-led coalition has failed to defeat the Houthis militarily or to restore the government the group toppled. Moreover, Saudi militarization of the border with Yemen has damaged the Yemeni economy—with negative consequences for Saudi Arabia. Crucially, Saudi Arabia’s security is contingent on Yemen’s stability and economic prosperity. As such, Riyadh should contribute to reviving Yemen’s moribund economy, both in the borderlands and in the inland agricultural sector.
Topic:
Security, Agriculture, Economy, Conflict, and Instability
Political Geography:
Middle East, Yemen, and Saudi Arabia

7. Why Brazil Sought Chinese Investments to Diversify Its Manufacturing Economy

Author:
Celo Hiratuka
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Since the beginning of the twenty-first century, economic relations between Brazil and China have grown significantly. The main driver of this process has been China’s enormous demand for agricultural, energy, and mineral commodities. On the one hand, Brazil’s strong competitiveness in these products has helped the country consolidate its role as an important supplier to China, increasing exports and turning China into the main destination for Brazilian exports since 2009.1 On the other hand, China, by virtue of its status as the “factory of the world,” has established itself as the main supplier of manufactured products to Brazil.2 Nonetheless, Brazilian scholars, think tanks, and private manufacturing firms have raised concerns. They have done so despite the great boost in bilateral trade flows; the favorable trade balance for Brazil; and the leveraging of businesses in several Brazilian sectors such as soybeans, iron ore, and oil. These concerns are related to the excessive concentration of Brazilian exports in a few products, the environmental impacts of these exporting activities, and the effects of strong Chinese manufacturing competition on Brazil’s domestic market. These worries have become more significant when one considers the growing importance of manufacturing changes with the diffusion of Fourth Industrial Revolution technologies and the search for new renewable energy sources and environmental sustainability. For Brazil, this matter reflects a need to advance bilateral relations beyond existing export trade volumes and toward new drivers of more diversified economic growth that will help the country escape a specialization in commodities. The fortunes of the Chinese company BYD in Brazil are highly relevant to these trends. BYD is a company that has diversified from the production of batteries into different innovative industrial sectors, such as renewable energy and electric vehicles. BYD has also been expanding rapidly in international markets, and in that process it chose Brazil as an important market, where it has built factories to produce electric bus chassis, photovoltaic panels, and batteries for electric buses. BYD’s trajectory in Brazil certainly has not been smooth. On the contrary, the firm has had to adapt to market fluctuations and, above all, to changes in the Brazilian government’s economic policies, which have made the company’s experience in the country quite turbulent. Despite this, BYD survived its first years in Brazil and more recently has been showing signs of continuing to invest in the Brazilian market. Analysis of BYD’s experience in Brazil shows, on the one hand, that there are important possibilities for new economic relations with China that go beyond trade in commodities, with productive investments that can potentially help Brazil simultaneously incorporate more knowledge-intensive activities and drive positive environmental impacts by generating renewable energy and reducing carbon emissions. On the other hand, the story of BYD also shows that the transformation of these possibilities into effective benefits requires coordinated actions on the part of Brazilian policymakers to offer a long-term horizon for Chinese investments. In that spirit, Brazil must craft a long-term strategy for its economic relationship with China to increase the odds that bilateral engagement can advance in a new and more sustainable, mutually beneficial direction.
Topic:
Bilateral Relations, Economy, Investment, Manufacturing, and Engagement
Political Geography:
China, Asia, Brazil, and South America

8. Hard Cash and Soft Power: When Chinese Firms Win EU Contracts

Author:
Allison Carragher
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The European Union is a committed defender of open markets. This extends to its public procurement mechanisms, which remain open to all bidders. EU policymakers have developed tools intended to defend the bloc’s interests in the face of increased economic and strategic competition from the People’s Republic of China (PRC), but few policymakers understand how the European public views the debate. As the first major EU-funded, China-built infrastructure project, the Pelješac Bridge in Croatia provides a unique opportunity to conduct a thorough analysis of European public opinion toward EU tendering policy and Chinese companies. Brussels has labelled the PRC a partner for cooperation and negotiation, an economic competitor, and a systemic rival,1 but the nuances of this policy remain difficult to ascertain. Projects and policies presented by China as “cooperation” often contain elements of economic competition or are leveraged by the PRC for strategic gain. However, this dichotomy has not filtered down to citizens. Extensive polling reveals that Croatians share very few of the concerns of EU policymakers. Furthermore, the PRC state-owned construction firm enjoys more visibility than the EU, which provided hundreds of millions of euros for the project. In terms of soft power, which is here defined as the ability of a country to shape the narrative, the Pelješac Bridge has been a resounding success for the PRC. The Croatian public has largely embraced the PRC’s preferred image of itself as a reliable and trustworthy economic partner and a benign power that does not interfere in domestic affairs. This opinion diverges from official EU policy and glosses over evidence of the PRC’s unfair economic practices, environmental and labor shortcomings, and interference in European democracies. Notably, the PRC’s soft-power gains were achieved on the EU’s own dime. It is not in the EU’s interest to bankroll the economic and soft-power ambitions of its systemic rival. As a democratic institution, the EU has a responsibility to both respond to public opinion and educate its citizenry when EU interests are at stake. In this case, the EU should recalibrate its tendering policy to be fairer and better aligned with its own economic and strategic interests. This process is currently underway, but it should also be extended to co-financing arrangements like the Team Europe approach, which combines traditional EU assistance with support from individual EU member states and international financial institutions. These policies must also be paired with renewed efforts at visibility and branding. Lastly, there is a need to collect and publish better data on the end users of EU funds in order to evaluate successes and identify future issues.
Topic:
Infrastructure, European Union, Economy, Business, Soft Power, and Strategic Competition
Political Geography:
China and Asia

9. Russia in the Arctic—A Critical Examination

Author:
Eugene Rumer, Richard Sokolsky, and Paul Stronski
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Russia has big Arctic plans, but how they will be realized is uncertain. For the United States this will likely mean the return to a Cold War–like environment rather than a new chapter in great-power competition in the Arctic. Russia’s Arctic ambitions have attracted increasing attention in the West over the past decade as climate change opens up new opportunities in the region for navigation and exploration of its riches. For its part, Moscow casts a wary eye on what it sees as a challenge from the United States and the North Atlantic Treaty Organization (NATO) to its position and ambitions there. The Kremlin’s rhetoric about Western encroachment has become more strident, in sync with its enhanced military posture and ambitious economic and infrastructure projects.
Topic:
NATO, Cold War, Infrastructure, Geopolitics, and Economy
Political Geography:
Russia, Eurasia, North America, Arctic, and United States of America

10. India’s Sustained Economic Recovery Will Require Changes to Its Bankruptcy Law

Author:
Anirudh Burman
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
As India’s economy recovers from the coronavirus pandemic, Indian businesses need efficient financial structures to regain their ground. Key reforms to India’s Insolvency and Bankruptcy Code could fill these gaps. One of the key drivers of economic recovery in India will be the efficient movement of capital from inefficient firms to efficient ones. The economic downturn caused by the coronavirus pandemic has been severe, and India’s economy was one of the worst affected in 2020–2021. Though the economy is recovering faster than initial estimates, sustained economic recovery will not take place if stressed businesses cannot restructure their debts properly or if failing firms cannot be resolved efficiently. India’s bankruptcy law is key to solving these challenges. In 2016 India enacted the Insolvency and Bankruptcy Code, 2016 (IBC), which was a landmark reform to the nation’s financial system and the first comprehensive law to regulate insolvency.1 But the IBC has been suspended for a period of one year since the COVID-19-related lockdown was imposed in March 2020. In its place, India’s banking regulator, the Reserve Bank of India (RBI), has introduced a limited restructuring scheme for COVID-19-related stress in the meantime. Older mechanisms for insolvency that are still in operation have historically not worked according to expectations. As the one-year period of suspension comes to a close, this paper argues that bringing back the IBC—with adequate modifications—is an important prerequisite for sustained economic growth. India historically suffered from a patchwork framework of insolvency laws that either did not give lenders adequate powers to recover their debts upon default or only catered to the interests of certain kinds of lenders—to the exclusion of others.2 The IBC is a modern and comprehensive bankruptcy law that since its enactment has had a significant role in reducing the problem of nonperforming assets (NPAs), or “bad loans,” in India’s financial system. In the wake of the economic disruption caused by COVID-19, the Indian government suspended the operation of critical parts of the IBC. These changes meant that lenders could not trigger insolvency proceedings against defaulting businesses if the default occurred after March 20, 2020. While this suspension possibly prevented unnecessary business failures and provided a “calm period” for the economy, these measures have outlived their utility.
Topic:
Law, Finance, Economy, and COVID-19
Political Geography:
South Asia and India

11. Tracking Reforms in Land Leasing and Change in Land Use: Insights From Gujarat and Karnataka

Author:
Ankit Bhatia
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
As India’s economy has become more urban and industrialized, property and land rights have evolved, too. In the states of Gujarat and Karnataka, key reforms in land leasing and change in land use show what may—and what may not—be a path forward. India is primarily an agrarian society. More than 60 percent of its population is dependent on agriculture and allied services and dwells in rural areas. In the past couple of decades, India has attempted to shift away from its rural-agrarian base toward an urban-industrialized economy. In this journey, it encountered many challenges, but none remain as severe and persistent as the ones related to the assignment and balancing of land and property rights. Land governance in India remains historically complex, politically sensitive, and economically inefficient. In recent times, state governments have attempted proactive measures to reform the sector and bring greater efficiency to land markets. Despite the exigency of these reforms, issues surrounding equity, abuse of power, and nexus among powerbrokers remain central and require thorough analysis. To unpack the fuller effects of the recent reforms, this paper aims to examine key reforms in land leasing and change in land use sub-sectors initiated by Gujarat and Karnataka states. The paper takes a comparative assessment approach to decipher the nuances and complexities of land governances in the two states. Given that land has deep historical connections, this paper briefly delves into the historical evolution of land leasing and change in land use regulation in the two states. The historical analysis highlights the political economy context of each sector and is followed by an in-depth review of the recent reforms. The paper covers reforms effectuated through legislative, executive, and judiciary actions. This approach allows a comprehensive tracking of different mechanisms at play. The paper brings out some interesting findings. In both the states, the change in land use sub-sector was able to reform more frequently than the land leasing sub-sector. Despite both states relying upon all three branches of government to initiate reforms, executive action was used most frequently. On occasion, the judiciary played a critical role, especially when lower branches passed judgments that provided windfall relaxation to the protective regulation. Further, the paper finds that most reforms were not structural in nature; they were merely attempts to ease the restrictions on the transfer of agricultural land. In a complete departure from past objectives, recent reforms attempted to dilute the protective framework of land leasing and change in land use regulation. It is understandable that socioeconomic and political realities have shifted and the archaic regulation may not serve its intended purpose. However, the recent reforms have failed to show a concrete new direction. Instead, they largely focused on allowing a greater transfer of land resources to industries, pushing toward more capital-intensive agriculture, and promoting digitalization of land-related governance and public service delivery.
Topic:
Reform, Economy, Urban, and Land Reform
Political Geography:
South Asia and India

12. How China and Pakistan Negotiate

Author:
Katharine Adeney and Filippo Boni
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Since being officially launched in April 2015, the China-Pakistan Economic Corridor (CPEC) has been one of the most watched set of projects under the aegis of Chinese President Xi Jinping’s signature Belt and Road Initiative (BRI). Having already injected around $25 billion into Pakistan, the CPEC not only has been dubbed the “flagship project” of the BRI, but it also holds a central role in Beijing’s global ambitions.1 While much has been said about the geopolitical implications of the CPEC, including for both India and the United States, less attention has been devoted to providing in-depth insights into the mechanics of how the BRI is unfolding on the ground in Pakistan. How do China and Pakistan negotiate the terms of CPEC deals? To what extent has Islamabad managed to exert agency in its dealings with Beijing? How does China adapt to the contexts it operates in? By now, the CPEC has been subject to much media, academic, and policy scrutiny, but these questions have not been answered. The power asymmetry between the two partners—coupled with the impression that the BRI represents a unidirectional Chinese endeavor, not just in Pakistan but also globally—has contributed to the erroneous representation that Beijing is merely imposing the CPEC on its all-weather partners in Islamabad. On the contrary, this study highlights China’s adaptive strategies in dealing with a host of Pakistani actors (including political parties, local communities, and the military) against the backdrop of Pakistan’s evolving political landscape and change in leadership following the country’s 2018 elections. In filling this gap, this paper foregrounds the importance of adopting a relational approach to studying how the BRI unfolds on the ground. This entails looking at how Pakistan and China have negotiated the CPEC’s energy, infrastructure, and industrial cooperation projects. The analysis is based on semi-structured elite interviews conducted by the two authors during three rounds of fieldwork in 2015, 2018, and 2020–2021 triangulated with a host of official reports, statements, and newspaper articles. Examining the domestic contours of the CPEC shows that Pakistani actors have wielded agency in important ways throughout the process, while Chinese actors at times have accommodated key Pakistani demands.
Topic:
Energy Policy, Bilateral Relations, Geopolitics, Economy, and Belt and Road Initiative (BRI)
Political Geography:
Pakistan, China, South Asia, and Asia

13. The Local Roots of Chinese Engagement in Pakistan

Author:
Muhammad Tayyab Safdar
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China has deepened its economic engagement with Pakistan through elite-centered negotiations over the routes and projects of the China-Pakistan Economic Corridor (CPEC). But elites are not the whole story: China has made inroads beyond Pakistan’s political elites with a broader array of local stakeholders in the country’s education, media, and energy sectors. Pull factors in each of these areas are giving local Pakistani actors incentives to develop closer relationships with Chinese actors. In education, China’s status as a rising global power and the promise of future economic returns have driven ever more Pakistanis to learn Mandarin and opt to study abroad in China. In the media sector, the financial pressures facing Pakistan’s private media houses have contributed to increasing domestic buy-in for news sharing agreements with Chinese media organizations. In the power sector, the lack of alternative sources of external funding for local Pakistani conglomerates has resulted in the emergence of joint ventures on electricity generation projects with large Chinese state-owned enterprises (SOEs). At the same time, Chinese government policies are serving as push factors to incentivize Chinese actors to expand their interactions in different segments of Pakistani society. For example, China has opened and sponsors Confucius Institutes and classrooms across Pakistan, while also offering scholarships to Pakistani students interested in studying in China. As Chinese firms have expanded their presence in Pakistan, they have worked with local universities to adapt to local customs and cultural and religious values. In media circles, stakeholders like China’s Xinhua News Agency have worked with local Pakistani media outlets to localize information dissemination and shape Pakistani public opinion on important international issues in ways that are in sync with Beijing’s worldview. And Chinese investment in Pakistan’s power sector is aligned with Chinese SOEs’ Go Global strategy and the expansion of these firms’ operations in overseas markets as part of the BRI. China’s engagement with Pakistani political, social, and economic institutions comes in response to local conditions. By adapting to these conditions and working through local institutions and actors, a host of Chinese actors are poised to continue deepening their interactions with different parts of Pakistani society.
Topic:
Education, Partnerships, Media, Economy, and Engagement
Political Geography:
Pakistan, China, South Asia, and Asia

14. Yemeni Border Markets: From Economic Incubator to Military Frontline

Author:
Ahmed Nagi
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
A string of border markets on Yemen’s northwestern border with Saudi Arabia turned the confluence of two countries’ peripheries into a center, gave rise to a distinct economic system, and bridged cross-border communities. The ongoing war in Yemen has either destroyed these markets or forced their closure. An end to the hostilities is unlikely to restore the status quo ante, owing to Saudi Arabia’s desire to establish a buffer zone. This would militarize the borderlands in perpetuity.
Topic:
Markets, Economy, Borders, and Military
Political Geography:
Yemen, Saudi Arabia, and Gulf Nations

15. Reimagining Regional Governance in Latin America

Author:
Federico Merke, Oliver Stuenkel, and Andreas Feldmann
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Latin America’s existing predicament stems from a complex set of interlinked social, economic, and political crises, which have been magnified by the advent of the coronavirus pandemic and a rising tide of isolationism and “antiglobalism.” These crises range from domestic polarization and economic travails, to ideological divergence, personal rivalries among the region’s leaders and U.S.-Chinese geopolitical competition, and all are hampering regional governance and negatively impacting the prospects of cooperation. Latin American governments urgently need to work together to address the manifold challenges they face as events in recent decades have shown that unless better regional mechanisms can be found, domestic and transnational challenges—from organized crime and environmental degradation to migration and anemic economic growth—will become even more difficult to address, with potentially devastating long-term consequences. Yet, despite the high stakes, traditional regional governance mechanisms seem paralyzed, lacking even the capacity to discuss the current untenable situation, let alone address it. The conventional wisdom is that regional cooperation across Latin America is practically nonexistent because its heads of states have insurmountable ideological differences and because the region’s dominant diplomatic institutions have failed to fulfill their purpose. All is not lost in the realm of regional governance, however. While cooperation is either dysfunctional or nonexistent in many dimensions, in others it persists with surprising resilience and vigor, although it is often overlooked or underappreciated. Existing cooperation is for the most part technical and based on the committed work by government officials who, even during the bleakest moments of the pandemic, have shown adherence to principled norms and driven by a refreshing degree of pragmatism. Effective regional governance and cooperation in Latin America is necessary for a broader conversation on the region’s role in a rapidly changing global order, shaped by technological transformation and genuinely global problems such as climate change, migratory pressures, and increasing security threats. As great power competition continues to shape the global order, Latin America often is regarded as a peripheral player. Yet far from being somehow apart or exempt from today’s rising geopolitical currents, Latin America, for better or for worse, is very much affected by them. Regional governance is a fundamental instrument to help Latin America overcome its numerous daunting challenges. Even when ideological differences make cooperation difficult at the high politics level, it is crucial to find avenues of progress at other levels and in informal or less visible ways.
Topic:
Politics, Regional Cooperation, Governance, Economy, and Ideology
Political Geography:
Latin America

16. Less Than a Full Deck: Russia’s Economic Influence in the Mediterranean

Author:
Joanna Pritchett
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Russia’s intervention in Syria in 2015, and then subsequently in Libya, marked its return as a major actor in the Mediterranean. Much has been made of Russia’s use of all elements of statecraft, including diplomatic, ideological, military, and economic instruments, to advance its interests in this region, a vital shipping and transit corridor. A closer look at Russia’s economic tool kit in this region, however, suggests concerns about Russian economic capabilities are likely overstated. Russia’s most important economic tools in the Mediterranean are its energy resources, arms exports, and ability to launder money through corrupt networks. These tools have complemented Russia’s diplomatic and military activities, particularly in areas where economic systems and rule of law have been weaker. Where Russia has been successful, it has increased a country’s dependence on Russian money, oil and gas, and/or arms, giving it a say in a country’s policymaking, particularly on matters of importance to Russia, and a way to undermine U.S. and the North Atlantic Treaty Organization’s (NATO) influence in the region. In particular, Russia’s unique economic tools have helped it manage its otherwise difficult relationship with Turkey, which depends on Russian oil and gas and is a new customer for Russian nuclear power and weapons systems. Turkey is a unique example in the Mediterranean where Russia already had a substantial trade and investment relationship beyond hydrocarbons, and then used these newer, more subversive tools to build its influence. These same tools have allowed Russia to gain more influence in Egypt, Algeria, and to some degree Cyprus over the last decade. These tools have proved of limited utility elsewhere, however, as they have not been backed by the traditional instruments of economic statecraft: trade in non-energy goods and services, foreign direct investment, and development assistance. Russia has trailed the United States and Europe, and in some cases China, in deploying these fundamental economic elements of foreign policy in the Mediterranean region. Based on economic data available, Russia’s bilateral trade with individual Mediterranean countries is low, its investment levels in most Mediterranean countries are insubstantial, and it is not giving large quantities of development assistance to the poorer countries along the Mediterranean’s eastern and southern rims. The lack of these traditional economic ties is surprising, given Russia’s military and diplomatic efforts to increase its influence in the region. Without them, Russia’s economic diplomacy in the region is highly based on symbolism and the relationships lack sustainability over the long term, which undercuts its geopolitical ambitions in the Mediterranean. If Russia’s ambitions in the Mediterranean region are limited to maintaining access, currying favor with key decisionmakers, and remaining a nuisance to NATO, then its current level of economic ties is likely sufficient. If Russia aims to grow its influence and clout with more countries in the region, however, its current economic tool kit does not appear to be large or sophisticated enough to achieve this. Economic statecraft is an important tool in any country’s foreign policy. Trade and investment deals link countries together in vital ways to improve living standards in each country. They also build relationships between people—politicians, business leaders, students, tourists—that promote mutual understanding and respect for each other’s cultures. The United States and the European Union (EU) have generally excelled in building these types of economic ties in the post–World War II era, and economic data show they continue to be the dominant economic powers in the Mediterranean. Continuing this leadership in the economy will likely ensure that Russian influence in the Mediterranean remains a manageable, if persistent, problem for the West.
Topic:
Foreign Policy, Geopolitics, Economy, Trade, Regional Power, and Energy
Political Geography:
Russia, Eurasia, and Mediterranean

17. Reassessing Russian Capabilities in the Levant and North Africa

Author:
Frederic M. Wehrey and Andrew S. Weiss
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Russia may be back in the Middle East, but is it a truly strategic player? The picture is decidedly mixed. After abandoning most of its presence in the Levant and North Africa during the late 1980s, the Kremlin has alarmed Western policymakers in recent years by filling power vacuums and exploiting the missteps of the United States and the European states. Moscow panders to the insecurities and ambitions of local regimes, trying to enrich itself along the way. While Russian activism is part of a broader push for great power status, most of its policies are rooted more in opportunism than grand strategy. Yet Russian influence is formidable in many respects. In war-wracked states like Syria and Libya, Moscow has adroitly deployed military forces and engaged with actors that are off-limits to Westerners, thus positioning itself as a significant power broker. In Egypt and Algeria, it has pursued arms deals that are unencumbered by human rights conditions. Russia’s economic footprint is expanding in fields ranging from infrastructure to tourism to energy, contributing, in some instances, to the region’s cronyism and corruption. At the same time, a closer look at Russian activism reveals that its ability to shape events in the Middle East is far more modest than is commonly assumed. Russia has neither the tools nor the willingness to tackle the region’s deep-seated socioeconomic and governance problems. In Syria, the limits of the Kremlin’s military commitment have been exposed amid clashes with other powerful, outside players and a hardening stalemate on the ground. For now, Moscow is simply not in a position to achieve its desired military or political outcomes absent a significant investment of new resources. Russian economic penetration is driven mainly by short-term objectives and a search for outsized financial rewards that sometimes fail to materialize or to make Moscow an attractive partner. Russian inroads are further limited by regional factors like fractured politics and capricious local actors, who, despite being plied with Russian attention and support, do not behave as docile proxies. In many instances, Middle Eastern rulers exert far more power in shaping the extent of Russian influence than conventional narratives suggest. Successive leaders of Egypt, for instance, have perfected the game of soliciting Russia’s attention to gain leverage over other patrons, namely the United States. For their part, Israeli leaders have worked hard to ensure that Russia does not throw major obstacles in the way of Israel’s ongoing campaign against Iranian military encroachment in Syria—yet they surely take note when Moscow does the bare minimum in raising concerns about the situation in Gaza. The limits of Russian influence are similarly noticeable in the heartbreaking economic crisis in Lebanon, where Moscow is little more than a bystander. With these limitations in mind, Washington should avoid viewing the region through a zero-sum, Cold War lens that sees every development as a net gain or loss for Moscow or minimizes the agency of local actors. In the context of multiple policy challenges across the globe and at home, U.S. decisionmakers need to prioritize the areas of Russian influence that necessitate a response. In so doing, they should avoid playing the arms sales game on Moscow’s terms or letting themselves be instrumentalized by autocratic Middle Eastern rulers who point to Russian overtures to seek leniency and support from Washington. U.S. and European policymakers have ample tools at their disposal that can frustrate or slow the more malign forms of Moscow’s inroads. Yet the net impact of such pushback on Russian resolve should not be overstated. Instead, Washington should focus its energies on its biggest comparative advantage vis-à-vis Moscow in the region: namely, its abundant sources of influence and leverage in the economic and security spheres, its still-potent soft power, and its leadership of multilateral diplomacy and the rules-based global order.
Topic:
Foreign Policy, Diplomacy, Geopolitics, Economy, and Strategy
Political Geography:
Russia, Eurasia, Middle East, North America, and Levant

18. China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System

Author:
Rajesh Bansal and Somya Singh
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Central bank digital currencies (CBDC) are digital tokens issued by central banks. In a way, they are the digital version of cash; their value is guaranteed by a central bank. Unlike money held in credit cards and mobile wallets, CBDCs are not a mere representation of physical money stored elsewhere. Instead, they are a complete replacement for currency notes. While several countries are developing their digital currencies, China is well positioned to take the lead with the digital yuan. This paper highlights ways in which China can use its digital yuan to internationalize the renminbi (RMB) and gradually chip away at the hegemony of the dollar. The first part of the paper focuses on the dollar’s dominance in the global financial system and the privileges the United States accrues as a result of the dollar being the world reserve currency. The United States has a tight grip on the world’s payment rails, especially in the case of cross-border transactions. For example, the Society for Worldwide Interbank Financial Telecommunications (SWIFT)—the largest cross-border payment clearinghouse in the world—has to comply with and implement unilateral U.S. sanctions. These sanctions seriously hinder trade and damage the economies of the countries affected by them, as was the case with Iran, which lost $150 billion worth of revenue as a result of U.S. sanctions.1 Once a country is cut off from SWIFT’s network, it becomes extremely difficult for it to trade with the rest of the world. Thus, via the dollar’s dominance and its geopolitical muscle, the United States is positioned to maintain a tight grip on the world’s financial system. In an increasingly multipolar world, this outdated, decades-old system of the dollar as the apex currency and the United States’ position of power that allows it to pursue its own geopolitical interests has become outdated. The U.S. dollar’s hegemony has been challenged by economies like those of the European Union (EU), Russia, and China. Of all the countries, China finds itself in a dominant position to gain from this transition. In order to challenge the dollar’s hegemony and internationalize its currency, China will have to move away not just from the dollar but also from the payment rails dominated by the dollar. The best way to simultaneously do both would be to introduce a new payment rail like CBDCs. This paper analyses the way the launch of China’s CBDCs could greatly enhance its currency internationalization prospects. Considering China’s growing economy and influence over the world, the paper argues that China’s CBDC launch could bring a period of momentous change in the global financial system. In order to challenge the dollar, China will have to build the payments infrastructure required to facilitate the use of its digital yuan. It will also have to incentivize other countries to adopt its digital currency. China’s ability to successfully promote its currency using CBDCs will depend heavily on the country’s ability to relax capital controls and maintain the world’s trust in its institutions. China’s geopolitics will play a key role here. In the last decade, some of China’s major geopolitical efforts have set the stage for its CBDC launch. As China continues to use its foreign policy and technological capabilities to grow its influence in the global financial system, the launch of the digital yuan could be a significant step forward in this direction. This paper examines the reasons for China’s past efforts at currency dominance and explores ways in which the country can use its CBDC to further internationalize its digital yuan.
Topic:
Foreign Policy, Finance, Economy, Central Bank, and Currency
Political Geography:
China and Asia

19. Civil Society and the Global Pandemic: Building Back Different?

Author:
Carnegie Civic Research Network
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Since the coronavirus pandemic began, civic activists around the world have shifted into a higher gear. As Carnegie’s Civic Research Network analyzed last year, the gravity of the health emergency has pushed many civil society organizations (CSOs) to engage in new ways to help alleviate the pandemic’s impact.1 Sometimes they have done this in cooperation with governments, but other times they have acted on their own out of frustration at governments’ sluggish and inadequate responses to the emergency. At the same time, many activists have had to defend themselves as governments have used the pandemic as a pretext for further clamping down on independent civil society voices, under the cover of emergency laws passed to help manage the crisis. As civic activists grapple with the challenges of the pandemic, they are also turning their attention to the long term. It is clear that the pandemic will reshape economics, politics, and international relations, but it is not yet clear how. Many countries are undergoing major economic upheaval and are searching for new economic templates to overcome the damage they have experienced. On the political side, the pandemic has fueled authoritarian actions and damaged the credibility of many democratic governments. Post-pandemic political life will likely entail heightened struggles for democracy and a search for new democratic practices that more effectively meet citizens’ needs. With regard to geopolitics, the pandemic is contributing to still greater tensions between the world’s major powers. Because of these factors, the pandemic is likely to have a long-term impact on the nature of civil society worldwide. Civil society has already adapted to the coronavirus pandemic through the growth of self-help activism. Looking further ahead, civic actors are helping to spark a rethink of economic models. In the political sphere, at least some civic actors are engaging in efforts to revitalize democratic politics, including through new ideas on technology’s role in post-pandemic politics. Finally, civil society is being reshaped by geopolitical competition: some civil society actors are being pulled into the Chinese and Russian orbits, while others are more firmly resisting political encroachment by these powers. In an overarching sense, civic activists are juggling uneasily at present as they focus on the immediate challenges of the pandemic while also trying to fashion new economic, political, and geostrategic agendas for the period after the pandemic.2
Topic:
Civil Society, Politics, Economy, Pandemic, COVID-19, and Activism
Political Geography:
Global Focus

20. China’s Influence in South Asia: Vulnerabilities and Resilience in Four Countries

Author:
Deep Pal
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China’s economic and political footprint has expanded so quickly that many countries, even those with relatively strong state and civil society institutions, have struggled to grapple with the implications. There has been growing attention to this issue in the United States and the advanced industrial democracies of Japan and Western Europe. But “vulnerable” countries—those where the gap is greatest between the scope and intensity of Chinese activism, on the one hand, and, on the other, local capacity to manage and mitigate political and economic risks—face special challenges. In these countries, the tools and tactics of China’s activism and influence activities remain poorly understood among local experts and elites. Both within and beyond these countries, meanwhile, policy too often transposes Western solutions and is not well adapted to local realities. This is especially notable in two strategic regions: Southeastern, Central, and Eastern Europe; and South Asia. China’s economic and political profile has expanded unusually quickly in these two regions, but many countries lack a deep bench of local experts who can match analysis of the domestic implications of Chinese activism to policy recommendations that reflect domestic political and economic ground truth. To address this gap, the Carnegie Endowment initiated a global project to better understand Chinese activities in eight “pivot” countries in these two strategic regions. The project’s first objective was to enhance local awareness of the scope and nature of Chinese activism in states with (1) weak state institutions, (2) fragile civil societies, or (3) countries where “elite capture” is a feature of the political landscape. Second, the project aimed to strengthen capacity by facilitating a sharing of experiences and best practices across national boundaries. Third, the project sought to develop policy prescriptions for the governments of these countries, as well as the United States and its strategic partners, to mitigate and respond to activities inimical to political independence or well-balanced economic growth and development. To establish a comprehensive picture of China’s activities and their impact, this project dug deeply into Chinese activism in four case countries in each region—eight countries in total. We began by holding workshops, so that influencers across countries could share experiences and compare notes. Invited participants included policymakers, experts, journalists, and others—all with deep local knowledge, steeped in their countries’ politics, economies, and civil societies. In Europe, the four countries were Georgia, Greece, Hungary, and Romania, and in South Asia, Bangladesh, Maldives, Nepal, and Sri Lanka. Cross-national discussions among these regional participants aimed to raise awareness, discuss the implications of China’s growing activism in their countries, and compare notes on the diverse ways in which these various countries had managed the rapid influx of Chinese capital, programs, people, technology, and other sources of influence.
Topic:
International Relations, Foreign Policy, Development, Economy, Engagement, Regionalism, and Resilience
Political Geography:
Bangladesh, China, South Asia, Sri Lanka, Nepal, and Maldives